💰 I’m Implementing A New Investment Strategy

July 05, 2022

Investing in 2020 was more fun, but 2022 has made me a much better investor.

Dr. Dividend's Financial Freedom Newsletter

July 5, 2022

by Dr. Dividend

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Market Overview

Congrats! If you’re reading this, you’ve survived the worst first half year the stock market has seen since 1970. June was a bad month for stocks (S&P 500 down 7.98%), bonds (up 0.04%), and crypto (total market cap down roughly $437 billion).

It was also a bad month to be a crypto company. Hedge fund 3 Arrows Capital has filed for bankruptcy after failing to repay a $670 million loan. BlockFi after seeking a $5 billion valuation last year, is reportedly being bought out by crypto exchange FTX for $240 million. Platforms Voyager and Celsius have paused account withdrawals and Coinbase has seen a sharp fall in revenues and has layed off 18% of its workforce.

The Russia-Ukraine War has raged on and to make matters worse, OPEC’s production has fell. OPEC has had a presumed spare capacity of 3-4 million barrels per day, but as of right now they are citing production constraints. This puts even more of a strain on oil as peak demand rolls around in these summer months. J.P. Morgan analyst Joe Carrol has predicted a “Stratospheric $380/barrel” scenario in which Russian sanctions cut the oil giant out of the market completely.

The S&P 500 saw a 7.98% decline during the month of June, led by the losses from 5 travel related names. American Airlines (AAL), Delta Airlines(DAL), Norwegian Cruise Line (NCL), Carnival Cruise Line (CCL), and Royal Caribbean (RCL) all saw June losses upwards of 29%.

In June, I received $113.22 in dividends from 17 companies. I added to 6 positions and even started 2 brand new positions. In the next segments, we’ll dive deeper into my portfolio, its dividends, and more!

The Portfolio

My portfolio consists of 33 long positions spread out over 10 of the 11 main sectors, as well as a new addition in the Funds Sector. My 5 biggest positions are in Apple, Home Depot, Starbucks, Microsoft, and Visa in that order. I’ve gotten AAPL down to the 10% threshold I like by adding to other companies that I’ll talk about later.

At the time of writing, my portfolio has made gains in 11 of my 33 positions. You can check out my winners and losers below:

Dividend Income

Throughout June I received $113.22 in dividends from 17 companies, here’s how it broke down:

QUALIFIED DIVIDEND (V) - $3.76

QUALIFIED DIVIDEND (UPS) - $7.66

QUALIFIED DIVIDEND (HON) - $4.93

QUALIFIED DIVIDEND (MSFT) - $4.97

QUALIFIED DIVIDEND (XOM) - $4.46

QUALIFIED DIVIDEND (SMG) - $4.63

QUALIFIED DIVIDEND (WBA) - $18.26

QUALIFIED DIVIDEND (TGT) - $5.42

QUALIFIED DIVIDEND (NEE) - $3.41

ORDINARY DIVIDEND (O) - $3.77

QUALIFIED DIVIDEND (HD) - $19.23

QUALIFIED DIVIDEND (WM) - $3.26

QUALIFIED DIVIDEND (MCD) - $6.93

QUALIFIED DIVIDEND (LMT) - $5.66

QUALIFIED DIVIDEND (UNH) - $4.95

QUALIFIED DIVIDEND (TROW) - $8.46

QUALIFIED DIVIDEND (PEP) - $3.46

TOTAL- $113.22

My biggest contributors in April were Home Depot with $19.23 paid and Walgreens with $18.26 paid this quarter. Home Depot is currently yielding 2.77% and it's one of my highest income producers. Buying Walgreens after its steep earnings drop this week will yield you 5.04%. I will be closely examining Walgreens' latest earnings call but from the headlines I've heard, I will not be adding at this time.

HD and WBA combined to pay out 33.11% of my June income. HD has been raising dividends for 11 straight years after a pause from 2006-2010, where dividend payments remained at $0.2250 per share. WBA has increased dividends for 46 consecutive years, earning its seat in the exclusive Dividend Aristocrats club. While Walgreens is not a company that I expect to post extravagant growth, I do believe they're undervalued and provide my portfolio with solid, stable dividends.

17 of my holdings pay in the third month of each quarter (Mar, Jun, Sep, Dec), and June was my best month for dividends yet!

Dividend Raises & Cuts

During June, 5 of my holdings raised their dividend payouts! W. P. Carey (WPC) and Realty Income Corporation (O) both raised their dividends by 0.2% and they’re up to 0.4% in dividend raises YTD. They both are looking to increase their dividend more throughout the year and this raise marks 116 dividend increases for Realty Income Corp.

After a huge drop in stock price, Target (TGT) raised its dividend a whopping 20% in June. This does a lot to reaffirm their shareholders beliefs in the company long term. Target recently announced that it had ordered too much merchandise that wasn’t selling and is expecting to take a hit on that, as well as spend an extra $1 billion in fuel costs this year. The stock price took a big hit, but this dividend increase gives me confidence in management’s ability to navigate these short term headwinds.

One of my favorite holdings United Health Group (UNH) announced a 13.8% dividend raise this past month. UNH now has a quarterly dividend of $6.60 and has been raising dividends uninterrupted for 11 years.

Lastly, Caterpillar (CAT) raised its dividend by 8.1% to $4.80 per share. This marks 29 consecutive years of dividend growth for Aristocrat Caterpillar.

What did I buy?

Over June, I added to 6 of my positions and opened 2 new positions, one with Canadian Natural Resources (CNQ) and SPDR S&P 500 ETF (SPY). Canadian Oil offers an interesting investment opportunity for a few reasons. One reason is that Canadian companies have the right to oils and minerals that may be present on or under their land. Another reason is that the US has shown declining oil production since February of 2020 and demand for oil this year has skyrocketed due to people wanting to fly and travel. With America not buying Russian oil and not producing much of it themselves, Canada will be primed to be a viable oil supplier for the US.

I chose to invest in CNQ for a few reasons. They operate in Canada, which I previously mentioned will likely be a critical supplier of oil for years to come. They’ve also grown dividends annually for 22 years and are committed to returning half of its free cash flow to shareholders by way of dividends and share repurchases. CNQ has reduced its debt from $20 billion to $14 billion from Q1 2021 to Q1 2022 and that’s before oil prices have skyrocketed to over $100/barrel. CNQ plans to deliver a 28% dividend raise to shareholders this year, is currently yielding 4.33%, and it has a low break even price in the mid 30s per barrel.

I started a position in SPY during June after being against ETFs for a while. I was against ETFs for a few reasons: I’ve been beating the market, I didn’t feel like I had to pay fees to others for investments I could make myself, and I don’t care for some of the ETF’s top holdings.

I’ve been beating the market thus far in my short investing career, but this is a small sample size. There’s no guarantee the companies I pick today are going to continue to outperform the market in the long run, and it’d be naive to think I can do this forever. A company I pick today might not be around in 50 years but the S&P 500 likely will.

As far as fees are concerned, it’s not ideal to pay others for your investments, however, SPY charges a very low fee of 0.09%. A $1000 investment in SPY equates to a $0.90 fee, which isn’t much at all.

There are holdings in SPY’s top 10 that I don’t care for, such as Meta (META) and Tesla (TSLA). I don’t really want to invest in them but they come with the territory of owning SPY. I can always make up for this by owning more of the individual stock in the companies I do believe in, and in the long run the winners of the S&P 500 should rise to the top. I could also be wrong on these 2 companies but time will tell in the long run. All part of investing.

Without further ado, here’s a list of all my buys in June:

Bought 1 TROW @ 123.6399

Bought 1 MDT @ 96.74

Bought 2 SBUX @ 76.4

Bought 1 MSFT @ 266.6

Bought 2 AAPL @ 146.2

Bought 1 CNQ @ 67.3

Bought 5 MPW @ 17.45

Bought 1 CNQ @ 66.7

Bought 1 SPY @ 408.9

Bought 5 MPW @ 16.3

Bought 1 SPY @ 392.5

Bought 1 SPY @ 377.5

Bought 3 CNQ @ 53.09

TOTAL INVESTED: $2,573.10

Overall I invested $2,573.10 during June and these shares contribute to $ of additional passive income over the next year. These purchases at the time of writing yield % on market value and % on cost. I’ve currently gained % on these purchases, equating to $ of capital gain in less than a month.

What did I sell?

I did not sell any of my positions during June, however, I did continue to sell covered calls on my SoFi position. During June, I sold 3 contracts under a Delta of .20 (my personal risk-tolerance level) and I realized a profit of $5.02. Selling covered calls was a 0.7% return on the cost of the 100 shares of SoFi I used as collateral. This is under my monthly goal of a 2% return, partly because I forgot to sell calls one week and unfortunately the broker I use charges $0.66 per options contract, which eats into my profits. I wrote about all the rules I use when selling covered calls here:

Overall, selling covered calls on SoFi is an easy way for me to get my feet wet with options. I sell one every week and just use the profits to buy more shares of whatever company I want. I love being able to extract the most value I can from my holdings and I'm even able to profit along the way while holding a company like SoFi that doesn't pay dividends. Eventually, my goal is to sell covered calls weekly on Apple and 3 (!) times a week on SPY.

What am I looking to add?

In the next month, I am looking to add to my SPY position first and foremost. I should have built up a solid ETF position before I picked out individual stocks, but you live and you learn as an investor. I’m looking forward to selling Covered Calls on SPY 3 times per week and generate income to buy more shares of individual companies I like, as well as save for other endeavors outside of investing.

I’m also itching to add Costco (COST). I’m targeting a $395 entry point to start buying and at that point it’ll be under its 5 year average P/E of 36x. I’ve examined the company’s balance sheet, income summary and business model and I love what they do. It’s hard to wait for a good buying opportunity but in investing, patience pays. If you’d like to know more about Costco, I wrote a newsletter issue examining them a couple weeks ago and a short thread you can read about them here:

Other News

In June I did start a Roth IRA, which was long overdue. Again, hindsight is 20/20 but I should’ve maxed out my Roth IRA before investing in a taxable brokerage but hey, you live and you learn.

I also have been adding to my Fundrise account, where I hold shares of Private Real Estate. Fundrise has shown 21 consecutive positive quarters for their investors and has beaten the market thus far in 2022. I will be allocating 14% of my pay to Fundrise weekly as a hedge against the market. Check out Fundrise’s performance below:

If you’re interested, you can sign up below using my affiliate link at no cost to you 👇

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Final Thoughts

June was an exciting month for me! I’ve finally came around to the idea of ETF investing and I’m excited to implement it as a cornerstone of my portfolio. I’ve also just had my biggest dividend month to date and it’s been great to watch the snowball effects of consistent dividend investing so far.

I’ve also started a Roth IRA and I can’t wait to reap the rewards of tax-free investing down the road. I’m also loving the alternative investments lately, as I’ve been investing in private real estate, gold and cryptocurrencies as of late. I don’t want all my eggs in one basket!

I’m still stalking Costco and Sherwin-Williams for potential entries. I’d like to enter COST at $395 and SHW at $200. Time will tell if I get those opportunities.

As always, I’m watching CPI data and I’m looking at consumer sentiment, oil prices, unemployment, and credit spending. These metrics help me gauge if a recession is coming. I’m not a fortune teller, I don’t have a crystal ball, but I can try to get ahead of a potential recession and start planning now.

I wish you all a green July full of dividends!

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